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Written by: Victoria Bartlett | Hargreaves Lansdown
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The Paris 2024 Olympic Games will consist of 32 different sports which will come together at the end of this month to make an incredible international event.
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The modern pentathlon is like a microcosm of the Olympics itself, and comparable, in many ways, to a portfolio of investments.
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We offer five very different fund ideas that we’d like to put in our fund management pentathlon.
The Paris 2024 Olympic games will have no less than 32 sports, with various disciplines of each. Amongst them is a Modern Pentathlon. This consists of five different sports: fencing, freestyle swimming, equestrian show jumping, pistol shooting and cross country running. The event is like a microcosm of the Olympic Games itself – five very different sports needing very different skills, but which somehow work together to become a whole.
In many ways the modern pentathlon mimics fund management. Any given investment can be rewarding, but a portfolio of investments is often much more so. Just as cross training in different sports leads to fewer injuries for athletes, a well-constructed portfolio of different investments can lead to lower volatility and a better outcome for investors. So, here are five ideas of very different funds to put in a modern pentathlon portfolio:
Fencing (Troy Trojan fund)
The use of what are essentially swords may make fencing seem like an aggressive sport. In reality, there is just as much skill in defending. The managers of the Troy Trojan fund, Sebastian Lyon and Charlotte Yonge, work with a similar philosophy, aiming to shelter investors' wealth just as much as grow it. Rather than trying to shoot the lights out, the fund aims to grow investors' money steadily over the long run, while limiting losses when markets fall.
The fund is focused around four 'pillars'. The first contains large, established companies Lyon and Yonge think can grow sustainably over the long run, and endure tough economic conditions. The second pillar is made from bonds, including US index-linked bonds, which could shelter investors if inflation rises. Some of the fund is also invested in traditional UK government bonds (gilts).
The third pillar consists of gold-related investments, including physical gold, which has often acted as a safe haven during times of uncertainty. The final pillar is ‘cash’. This provides important shelter when markets stumble, but also a chance to invest in other assets quickly when opportunities arise. Nimble, smart and defensive – all attributes that a good fencer needs.
Freestyle swimming (BNY Mellon Multi-Asset Balanced fund)
In a freestyle swimming race, contestants are fee to swim any stroke they wish (although in reality it is extremely unusual to see swimmers use anything other than the fastest stroke - front crawl). Managers of multi asset funds have similar freedom – able to pick the markets and instruments best suited to conditions.
The BNY Mellon Multi-Asset Balanced Fund focuses on companies with good long-term prospects from across the globe, along with some bonds and cash to act as diversifiers. The underlying universe of potential investments for this fund is large and includes emerging markets, smaller companies, high yield bonds and derivatives. For those who like a freestyle approach, but don’t want to have to think about the asset allocation decisions themselves, a fund like this could be a good choice.
Equestrian Showjumping (Invesco Tactical Bond fund)
Showjumping requires real skill. Not only does the rider have to be one with the horse, but together they must navigate various obstacles whilst appearing calm and totally in control. Bond markets are similar, and bond managers must also possess skill to navigate the obstacles of global economics and geopolitics. The managers of the Invesco Tactical Bond fund do just this.
The fund is co-managed by Stuart Edwards and Julien Eberhardt, who can invest in all types of bonds, with very few constraints placed on them. The performance of the fund hinges on their ability to interpret the bigger economic picture. They aim to shelter the portfolio when they see tough times ahead; and seek strong returns as more opportunities become available. Depending on the managers’ views, at different times this can be a relatively high-risk bond fund or can be run on a conservative basis. Calm, collected and always in control – a showjumper’s dream.
Pistol Shooting (Rathbone Global Opportunities fund)
Shooting a pistol is a skilled and deliberate skill, but one which should be used with caution and control. This is akin to the skillset of James Thomson, the manager of the Rathbone Global Opportunities fund. The fund invests across global stock markets (including the UK) and gives exposure to a broad range of equities. Thomson, is undoubtedly a skilled investor, and one of only a few global fund managers to show they can pick great companies and perform better than the broad global stock market over the long term.
His success can be put down to a straightforward, skilled but disciplined approach, and a willingness to view the world a little differently. Global equity markets can be a minefield, but Thomson navigates them with ease. He shows all the hallmarks that a great pistol shooter should have – skill, caution and control.
Cross Country Running (iShares Emerging Markets Equity Index fund)
Cross country running requires endurance and adaptability. These are characteristics which we also see in emerging markets funds. From big Asian countries like China and India, to Brazil and Mexico in South America, these countries offer a lot of potential as part of a portfolio for investors looking for long-term growth opportunities. But it could take time for them to fully develop, so the risks are greater and higher levels of volatility should be expected.
The iShares Emerging Markets Equity Index fund aims to track the performance of the broader emerging stock market and is one of the lowest-cost options for investing in these markets. The fund invests in a broad spread of companies based across emerging countries, including China, India, Brazil, South Africa and Taiwan. It is a convenient way to invest in the emerging markets. There is potential for volatility along the way though, so investors many need endurance.
Fund performance vs benchmark
